“I’ve received several allegations about how these
companies manipulated the village meetings,” Deo said in New
Delhi. “Having cross-checked, I’m convinced they did. I’ve
written to the environment minister to cancel the mining lease
if they fail to conduct the meetings again under video.”

The agriculture-versus-industry row in India has gained
traction as villagers in the eastern state of Odisha stymied
plans by South Korean steel giant Posco to build a plant for
almost a decade and the tribes of Niyamgiri foiled Vedanta
Resources Plc (VED)’s bid to mine bauxite in the remote hills of the
state. The growing strife is feeding a rebel movement of Maoist
guerillas, who promise to uphold the rights of villagers in
India’s biggest mining regions.

The shares of Hindalco fell 1 percent to 102.45 rupees at
the close in Mumbai, the lowest since Aug. 28. The benchmark S&P
BSE Sensitive Index rose 0.2 percent. London-listed Essar Energy
fell as much as 2.9 percent to 55.15 pence and traded at 56.50
pence as of 10:03 a.m. local time.

Tiger Suits

On Jan. 23, members of environmental group Greenpeace
dressed in tiger suits scaled the Mumbai headquarters of Essar
and unfurled a banner reading “We Kill Forests.”

Mahan Coal’s mining area would eat into more than 1,182
hectares (2,921 acres) of forest land with more than 500,000
trees, according to the government. The company, which secured
an initial permit for the project in October 2012, can only
start mining after securing final approval.

“We strongly refute any allegation of influencing the gram
sabhas,” Tiwari said in an e-mail, referring to village
meetings on the project. “The gram sabhas were conducted by
government authorities in all the three villages in a fair and
transparent manner. We had no role to play in it.”

Output Share

Essar will use 60 percent of Mahan’s annual coal output of
9 million metric tons to help run a 1,200 megawatt power plant,
while Hindalco will take the rest for a 900 megawatt plant to
run a 359,000 tons-a-year aluminum smelter.

The Mahan coal mines, lying in the cover of forests in the
state of Madhya Pradesh, are located around the district of
Singrauli, home to some of the nation’s biggest deposits of the
fuel. Companies, including Essar, Reliance Power Ltd., NTPC Ltd.
and Jaiprakash Associates Ltd., have committed almost $15
billion in investments in the region.

“We have a lot of wasteland and getting land to build a
project shouldn’t be a problem if the industry is sensitive to
the local population,” said Chandrajit Banerjee, director
general at industry group Confederation of Indian Industry.
“We’ve formed groups to sensitize the industry about the
demands of the local population so both parties can benefit.”

The state government is investigating possible breaches of
law in the Mahan village meetings, M. Selvendran, the chief
administrator of Singrauli, said by phone. The probe is expected
to be completed in a month.

Village Meetings

According to law, companies seeking to build projects in
forest land must obtain the permission of villagers living in
and around the area through the village meetings. The villagers,
mostly tribes, depend on the forest for leaves, fruits, cattle
feed, firewood and shelter.

Environment Minister M. Veerappa Moily, who cleared
projects worth $24 billion within a month of taking charge at
the ministry on Dec. 23, refused clearance to Vedanta after
villagers unanimously rejected the proposal.

“We’ll not clear any project that villagers oppose,” he
said in a Jan. 14 interview.

The Mahan area is dotted with power plants that have helped
create islands of prosperity, even as a majority of the
population has struggled to make a living. The region was marked
as a no-go zone for coal mining by the ministries of coal and
environment in 2009. A panel of ministers reviewing several
mining projects in May 2012 approved Mahan Coal’s plans with
additional conditions, Tiwari said today in a statement.

Mainstay Mine

The Mahan mine, allotted to the companies in 2006, is the
mainstay for an adjoining $2.6 billion aluminum and power
complex being planned by Hindalco and a $1.2 billion power plant
by Essar. Losing the mine would starve these projects of fuel,
prompting them to seek supplies at almost double the cost.

Hindalco and Essar have spent most of their planned capital
expenditure for the project and started their power plants and
the aluminum smelter using coal from sources other than Mahan.

“These are investments of billions of dollars made on
promises of a coal mine, the very reason why the projects are
based in the region,” Alex Mathews, head of research at Geojit
BNP Paribas Financial Services Ltd., said on Jan. 31. “Even
after so much investment, coal mining is not in sight, which
means they will have to run their factories from outside coal at
higher costs.”

Coal India Ltd. (COAL), India’s monopoly miner, incurs a cost of
about 1,200 rupees ($19) to produce a ton. It sells the coal at
almost double the price in electronic auctions, a market
Hindalco and Essar may tap to secure supplies if mining at Mahan
is stopped.

“A feeling has grown with money you can bulldoze
anybody,” Deo said, referring to Mahan’s village meetings. “As
far as I’m concerned, I can’t bypass the law on basic human
conditions.”